Ed Miliband must not be defined by his enemies

The coalition’s rhetoric of Labour’s supposed “deficit denial” should not be indulged.

Legend has it that during one of Lyndon Johnson's early congressional campaigns, he instructed his aides to spread the rumour that his opponent, a local farmer, was having sex with his pigs. "But Lyndon, you know that's not true," said his campaign manager. To which LBJ is said to have replied: "I know. I just want to hear the sonofabitch deny it."

It is a cardinal rule of politics: don't allow your opponents to define you, nor dignify their disingenuous claims with defensive responses. The right wing learned this lesson long ago and George Osborne, a latter-day LBJ in his tactical guile and flair for political scheming, has had Labour politicians - with, perhaps, the exception of Ed Balls - on the defensive for several months now, accusing them of being "deficit deniers", a catchy term coined by the Chancellor of the Exchequer in his speech to Bloomberg on 17 August and then gleefully embraced by the echo chamber of the Tory press

But it is a preposterous and dishonest phrase that makes a mockery of the coalition's claim to embody the "new politics". Does anyone, anywhere, deny that the UK Budget deficit stands at a peacetime record of £155bn, or 11 per cent of GDP? And didn't the Labour manifesto in May pledge to "halve the fiscal deficit over the next four years"?

In denial

So why, I wonder, have some inside Labour's high command decided to indulge Osborne and co by denying that they are "deficit deniers"? "We are not in deficit-denial territory," an "aide" to Ed Miliband told the Times on 11 October. And when I challenged a member of the new Labour leader's inner circle on the use of this Tory phrase, he told me: "Yes, it's odd but it's true. We aren't deficit deniers."

Memo to Team Ed: stop saying that you're not deficit deniers (or wife beaters, for that matter). Instead, pick up a copy of Don't Think of an Elephant by the US cognitive scientist George Lakoff, in which he outlines how conservatives control public discourse by "framing" issues to "prove" their point of view. Lakoff cites the phrases "tax relief" and "tax burden" as examples: they reinforce the right-wing meme of taxation "as an affliction".

Castigating opponents of the coalition's reckless and ideological cuts as "deficit deniers" has the same distorting effect. Balls, during the Labour leadership campaign, understood this point, choosing to resist and rebuke the Tories' obsession with the deficit. "Isn't it interesting that the papers are reporting how Osborne is 'relieved' not to be facing Ed [Balls]?" says a despondent supporter of the new shadow home secretary. But Balls, he went on, has now been "muzzled" on economics and specifically the issue of deficit reduction.

The loss is Labour's. In his own speech to Bloomberg, ten days after Osborne's, Balls turned the tables on the Chancellor by describing the latter's Hooverite zeal for public spending cuts as a form of "growth denial" and calling for "vital investments now, which support jobs and recovery".

This is the message Labour must promote: cutting spending is not the same as cutting the deficit. The new shadow chancellor, Alan Johnson, has joked that he plans to buy an economics primer to prepare for his new post. I have a better suggestion for him: reread Balls's speech. Or alternatively go online and download a research paper entitled "The Economic Consequences of Mr Osborne", co-authored by Victoria Chick, emeritus professor of economics at University College London, and Ann Pettifor, one of the few British economists who can credibly claim to have predicted the crash. Having studied the data from 1918 to 2009, they conclude: "The empirical evidence runs exactly counter to conventional thinking. Fiscal consolidations have not improved the public finances . . . Consolidation increases, rather than reduces, the level of public debt as a share of GDP and is, in general, associated with adverse macroeconomic conditions."

Miliband and Johnson may have signed up to Alistair Darling's plan to cut the deficit in half over four years but neither has yet committed to the second, less-discussed dimension of the Darling plan, which says that deficit reduction should be based on a 2:1 (66 per cent to 34 per cent) ratio of spending cuts to tax rises. (The coalition's ratio, as outlined in the Budget, is to use a split of 3:1, or 74 per cent to 26 per cent.) On the contrary, Miliband told an interviewer the day after his conference speech, on 29 September: "I would do more from taxation than Alistair proposed in his plan." And at the Channel 4 News hustings on 1 September, Ed described the Darling plan as having "the wrong ratio. I think we should look to see where we could get more tax revenue from."

Tight reins

I'm told that the new Labour leader - who taught economics at Harvard during his sabbatical in 2003-2004 and chaired the Treasury's Council of Economic Advisers for a year upon his return to the UK - is considering switching to a 1:1 (or 50 per cent to 50 per cent) ratio of spending cuts to tax rises, as advocated by Balls during the leadership campaign. Johnson would be expected to fall in line, as Miliband has made it clear, in public and in private, that he has no plans to make the same mistake as Tony Blair and outsource the formulation of fiscal policy to his shadow chancellor.

It could prove to be a shrewd move by the Labour leader and would be difficult for the Tories to dismiss, given the history of fiscal consolidations at home and abroad. In his Budget statement, in November 1994, the then Conservative chancellor and current Justice Secretary, Kenneth Clarke, told MPs that a 50:50 ratio would "meet the objective of healthy public finances". Norman Lamont, Clarke's predecessor in No 11, also matched spending cuts with tax rises, as did Sweden (53:47) and, to a lesser extent, Canada (60:40) in the 1990s - two countries routinely held up as models of fiscal consolidation by deficit hawks.

There are also plenty of popular tax rises that could help raise the cash: the bonus tax on bankers yielded £3.5bn last year. Tripling the coalition's bank levy (as recommended by the IMF) would raise an extra £6bn and a so-called Robin Hood tax on financial transactions (backed by France and Germany) could secure another £20bn. Show me the Middle England voters, Daily Mail leader writers or Lib Dem MPs who'd object to any of these tax rises.

So don't go wobbly, Ed. Now is the time to be bold - and bash the bankers.